Budget 2024: FMCG sector seek measures to boost rural demand

The FMCG industry expects measures to boost rural consumption in the upcoming Union Budget 2024.

The fast-moving consumer goods (FMCG) sector players have seen green shoots of recovery in rural demand in the first quarter of CY2024. Rural demand outstripped urban consumption in the January-March quarter after lagging in the previous quarter.

With the recovery in demand, FMCG stocks have also been in focus recently with the sectoral NIFTY FMCG index advancing around 13% in the past three months.

As Finance Minister Nirmala Sitharaman is going to present the Full Budget for FY 2024-25, the consumer goods manufacturers and suppliers expect measures to boost rural jobs, agricultural infrastructure, and farmers’ income.

Here are the key expectations of the FMCG industry from the first Budget of the Modi 3.0 government.

Steps to promote inclusive growth

FMCG players seek announcements in the budget to drive inclusive growth in rural parts of the country. Better road networks, infrastructure facilities, investment in agriculture and manufacturing activities in rural areas would boost inclusive growth, which in turn would increase consumption.

Booster for rural consumption via MGNREGA

Steps focusing on job creation in rural areas and leaving more money in the hands of consumers through rural job schemes like MGNREGA would also be welcomed by the FMCG industry. Enhanced funding for MGNREGA and direct benefit transfer schemes for people in rural parts would stimulate demand. Finance Minister Nirmala Sitharaman allocated ₹86,000 crore for MGNREGA, the same as the revised estimates for FY24, in the Interim Budget in February. FMCG players expect a higher allocation for the rural job scheme.

Lower inflation

Measures to push the rural economy through higher spending but keeping inflation under check is one of the key expectations of the FMCG industry. Lower commodity prices have helped revive demand in rural markets for FMCG companies. Recent data has shown a spike in wholesale inflation to a 16-month high of 3.36% while retail inflation hovers around 5% in June 2024, above the RBI’s comfort zone of 4%.

Push for manufacturing

FMCG players expect faster disbursement for PLI schemes to boost the manufacturing sector which would drive the rural demand. Easy financing for MSMEs and the creation of robust supply chains in rural areas will also be beneficial for the rural economy and job creation, according to FMCG sector experts.

Address farmers' challenges

FMCG players expect the budget to announce steps for addressing various challenges faced by farmers. Climate change has posed a serious threat to the stable income of farmers. An effective crop insurance scheme would help protect farmers from the impact of adverse weather conditions on crop output. Creation of storage facilities to reduce farm waste, better irrigation facilities and higher spending on rural facilities would be expected by FMCG players.

Farmers are also facing higher input cost pressure related to fertilisers, seeds, and labour which have reduced their income levels. The consumer goods sector also expects announcements to promote the production of chemical-free food that is safe for consumption. The recent revival in rural demand has put the rural markets in focus. The demand revival was led by electrification, better infrastructure, and digital connectivity, which enhanced rural outreach and direct distribution.